Return to Gold Standard and price per ounce

http://american.com/archive/2007/ja...-contents/0116-question-answer-trade-deficit/



13. Doesn’t the big trade deficit mean fewer jobs for Americans?

When clothing is imported rather than produced at home, the imports reduce demand for U.S. domestic labor and other inputs in the clothing industry; when U.S. clothing exports rise, the demand for domestic labor in the clothing market rises. Looking at these facts, some observers concur with the “mer*cantilist” view that imports are bad for the economy, while exports are good.

But that would be true only if labor not required in one sector had no other use in the U.S. economy. The clothing industry might be hurt by imports, but workers employed in that sector can move to other industries. In fact, total U.S. employment has grown significantly as the trade deficit has grown, and economists find no statistical evidence that big trade deficits mean big unemployment.

It’s helpful to think of trade as representing a kind of new technology that allows us to get more or bet*ter output from the same available inputs—which is the definition of increased productivity. There is a clear overall benefit, but trade, like improved technology, does hurt some people in the process. Over time, how*ever, our rising standard of living depends on higher productivity—whether achieved through improved technology or gains from trade.

Chad P. Bown is an asso*ciate professor of economics at Brandeis University and a fellow at the Brookings Institution. Rachel McCulloch is Rosen Family Professor of International Finance at Brandeis.

 

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6. Are these financial-account surpluses causing the United States to get deeper into debt to the rest of the world?

We often hear that the U.S. has gone from being the world’s number-one creditor to being the world’s number-one debtor. The truth is more complicated.

Remember that the financial-account sur*plus that balances out the current-account deficit is composed of both borrowing and selling assets. Although U.S. borrowing has been important—foreigners are major customers for U.S. Treasury securities and other bonds, and so are indeed lending to Americans—a major part of the cap*ital inflow is through private foreign purchases of U.S. equities (stocks), and another large part is through increased foreign ownership of companies based in the United States.

This last form of capital inflow is called foreign direct investment (FDI). It includes transactions in which a foreign firm acquires a substantial stake in an exist*ing U.S. company (mergers and acquisitions) as well as ones in which a foreign firm builds something new in the United States (greenfield investment).

We often hear that the U.S. has gone from being the world's number-one creditor to being the world's number-one debtor. The truth is more complicated.

There is a key difference between debt and equity investments. U.S. debt held by foreigners requires us to make scheduled payments of interest and principal, but foreign equity investments do not. Also, unlike the debt of most developing countries, U.S. debt is denom*inated in this country’s own currency, which we issue ourselves. Thus, the U.S. financial position, although perhaps worrisome for other reasons, does not hold the threat of triggering the kind of financial crisis we have seen recently in East Asia or Latin America.

In addition, as Figure 1 shows, there has been lit*tle change in U.S. net asset income despite the huge growth in the rest of the world’s net holdings of U.S. assets, which have quadrupled since 1994. One rea*son is that much of the foreign-held debt is in the form of U.S. Treasury securities, very safe assets with low interest rates.

In contrast, much of U.S. holdings of foreign assets represent foreign direct investments, such as factories and mines. These assets, because they are riskier, typ*ically yield a much higher return per dollar. Moreover, many of these U.S. invest*ments were made long ago, so their true market value is much higher than what appears in the official statistics.

 

have you been to japan? its crazy, they pay 2-3 times more to buy thier own products than what we pay for them. for example; i saw the ps3 for about $1100 when i was there. they have huge pride in thier products and business' know that.

 

http://economics.about.com/od/foreigntrade/a/trade_deficit_h.htm

In 1975, U.S. exports had exceeded foreign imports by $12,400 million, but that would be the last trade surplus the United States would see in the 20th century. By 1987, the American trade deficit had swelled to $153,300 million. The trade gap began sinking in subsequent years as the dollar depreciated and economic growth in other countries led to increased demand for U.S. exports. But the American trade deficit swelled again in the late 1990s. Once again, the U.S. economy was growing faster than the economies of America's major trading partners, and Americans consequently were buying foreign goods at a faster pace than people in other countries were buying American goods. What's more, the financial crisis in Asia sent currencies in that part of the world plummeting, making their goods relatively much cheaper than American goods. By 1997, the American trade deficit $110,000 million, and it was heading hi

 

efore World War I, the world economy operated on a gold standard, meaning that each nation's currency was convertible into gold at a specified rate. This system resulted in fixed exchange rates -- that is, each nation's currency could be exchanged for each other nation's currency at specified, unchanging rates. Fixed exchange rates encouraged world trade by eliminating uncertainties associated with fluctuating rates, but the system had at least two disadvantages. First, under the gold standard, countries could not control their own money supplies; rather, each country's money supply was determined by the flow of gold used to settle its accounts with other countries. Second, monetary policy in all countries was strongly influenced by the pace of gold production. In the 1870s and 1880s, when gold production was low, the money supply throughout the world expanded too slowly to keep pace with economic growth; the result was deflation, or falling prices. Later, gold discoveries in Alaska and South Africa in the 1890s caused money supplies to increase rapidly; this set off inflation, or rising prices.

 

You should check out the documentary I.O.U.S.A. its a great film, and it breaks down the deficits barney style.

 

Yeah - really? They are exporting in mass and yet they've been in recession for almost a decade...

Actualy, the fact that you missed was that the stronger the US dollar is the better it is for manufacturing and exports. So it is doubly stupid to propose a gold standard to strengthen the dollar and then complain that we don't make anything....jeez.


Ruben

 

China has the highest exports because they artificially keep their currency low. We see their products as cheap, so we buy a lot of them, but if their currency became stronger, we might start buying things elsewhere. So I disagree with you on that.

 

Wrong. Fiat currencies have always failed. Gold and silver have been a store of wealth for 6000 years.

When Napoleon was defeated in Waterloo Nathan Rothschild (with news 48 hours ahead of time) risked the family's gold and bought a ton of bonds secretly on the cheap (after initiating panic selling, because the British didn't need to fund their armies any longer for the war and he knew that the Brits beat Napoleon but by merely selling his own bonds he made it seem that he knew the British lost) held the bonds for a year and basically made a killing (+40%) and pretty much took over the British markets single handedly with that trade and made the Rothschild family their first huge sum of money. He used gold to buy as a store of wealth.

I saw this on PBS. Naill Ferguson's Ascent Of Money four part documentary. It's the companion series to his book of the same title. Very good stuff by the way. I believe he also has a book solely on the Rothschilds as well.

JP Morgan quote: Gold is money. Nothing Else.

Read The Creature From Jekyll Island by G. Edward Griffin. You will learn about the Rothschilds, JP Morgan and others creating the Federal Reserve in 1913. It is also a great read for explaining how the Fed's monetary policy works, how it affects the economy, the IMF bailouts of third world nations (making them debt slaves to steal natural resources cheaply), bailouts, and much, much more. It's a great book.

PS I believe it was silver that the Spanish had too much of from their raping of South America which destablized the value of silver in Spain and thus ruining their empire. I believe that is what you are referring to in your quote below. But ultimately that was an issue of supply and demand. Too much silver made the silver to gold ratio too high. Ratio historically has been 16 to 1 silver to gold.

Additionally, the Roman Empire was eventually ruined due to devaluing it's currency to maintain it's Empire and imperialism. IE Silver by either cutting the silver with other metals when making the coins or merely trimming silver pieces off of the coins. Sound familair? It's because it is. Essentially the US is trying to devalue it's currency to inflate it's way out of the credit crisis so we are using dollars that are worth less to pay off our debts. All the while getting into wars and trying to support it's imperialistic empire. IE military bases across the globe. Inflation in our future? Definitely. Hyperinflation? Possibly.

There are literally hundreds of examples in world history regarding the devaulation of the currency. FDR devalued the currency during the Depression by saying that gold was now worth $35 an oz. instead of $20 an oz. Thusly devaluing the currency by 75%. Weimar Republic. North Korea and Venezula both did this during the past six months. And of course there is Zimbabwe. Also, Argentina from 1975 to 1991 and Brazil from 1986 to 1994 and Russia and Ukraine in the 1990's.

http://en.wikipedia.org/wiki/Hyperinflation

Visit www.zerohedge.com a very, very good site at keeping up with what is going on globally (Euro crisis etc.) and also our own mess we are in here in the US. Many former and current Wall Streeters writing anonymously to educate the masses and show how the games are played on Wall Street. And also to hold the feet to the fire of our legislators and Wall Streeters. I have learned so much over there in the last year. The members are very helpful with educating other members and answering questions. Lots of cynicism over there so it gets pretty funny at times with the comments sections of the articles. Lots of info on gold too. Enjoy!

 

It will never happen, even though the current system is UNCONSTITUTIONAL. But then again, politicians have never let a mere founding document stand in their way.

Silver and Gold is the CONSTITUTIONAL money, though it has no real value other than as an accepted medium of exchange for many peoples across the globe for centuries. It's value is still based on acceptance.

The reason it won't happen is that there is no other way for the politician to extract wealth from the entire population without stirring up revolution. If we went back to a commodity based currency, you would have to confiscate the commodity from the population to extract wealth and that leads to rebellion.

This system allows the politicians and cronies (through the FED) to simply extract wealth from everyone using the currency (far beyond just this country) by printing money which dilutes the value of goods and services derived from productive ventures. Why rob the bank when you can be the bank and create money out of the ether. You can even play the game of borrowing at interest added to pay off cronies and pay both principle and interest in ether dollars to make it look legitimate.

All the while, we are forced to use the same currency for productive enterprises at ever more diluted values as the printing presses ( the penny-anti rip off) and data entry (the big rip off) work overtime to pay cronies.

Both Crony Capitalist AND Crony Communist steal your money as they persuade you to take sides and exhaust your energy fighting the make-believe war waged by political parties with the same goal of stealing your wealth and your birthright and your blessing.

 

RedOakPresoBox-with all due respect, I wouldn't try convincing this Ruben guy. I've said many of the same things you just mentioned and he continually argues. I agree with you 110%, and you remember your facts much better than myself. Anyways, best of luck with Ruben.

 

Ecept that it hasn't as proven with the GDP numbers over the last 70 years that were posted.

So when you make a false statement, everything afterwards is useless.

Ruben

 

Actually that only flies with a weaker dollar. A weaker dollar supposedly allows for stronger exports. The Fed will tout a strong dollar policy but they prefer the weaker dollar.

So, the next couple of quarters should be ****ty because of the strong dollar recently. Look for quarterlies to fall short for companies with large global sales footprints. My guess is the numbers will fall short and they will have to drop estimates for next quarter too. Just an educated guess. They will more than likely be hurt state side here too with weaker domestic retail sales due to higher unemployment.

 

RIght on. I just told him the same thing giving China as an example on how they artificially suppress their currency to keep exports high.

 

You must have missed my last thread on the GDP manipulation.

 

ROFL!!

http://www.nowpublic.com/debunking_gold_standard_myth_legality

Myth: The Federal Reserve Is Unconstitutional

Established in 1913, the Federal Reserve (the Fed) is the
quasi-governmental body that manages and maintains the value of US
currency on the national and international market. Though the inner
workings of the Federal Reserve are somewhat complex, its power to
regulate the currency stems from its authority to issue Treasury
Securities on the open market. These securities, in conjunction with
the authorities granted to private banks to lend in excess of deposits,
allows the Federal Reserve and its associated banks the ability to
create (and through a more circuitous process destroy) money as needed
within the US Economy.

Critics charge that the Fed is unconstitutional, citing, as Bacher et allia do in "Fiat Empire," the following excerpt from Article I of the United States Constitution:

The Congress shall have Power To coin Money, regulate the
Value thereof, and of foreign Coin, and fix the Standard of Weights and
Measures; No State shall make any Thing but gold and silver Coin a
Tender in Payment of debts.

Such a sentence would seem the death-knell of the Federal Reserve and its fiat money system, but Article I contains no such sentence.
The above quotation is a convenient fiction, cobbled together from two
dispirit sections of Article I and joined - incorrectly - with a
semi-colon; thus wrongly implying a continuation of thought where none
exists. What follows are the component sentences in their original
context.


Article I, Section 8, Paragraph 5: [The Congress
shall have Power] To coin Money, regulate the Value thereof, and of
foreign Coin, and fix the Standard of Weights and Measures;

Article I, Section 10, Paragraph 1: No State shall
enter into any Treaty, Alliance, or Confederation; grant Letters of
Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing
but gold and silver Coin a Tender in Payment of Debts; pass any Bill of
Attainder, ex post facto Law, or Law impairing the Obligation of
Contracts, or grant any Title of Nobility;

The quotation from Bacher et allia is a conglomeration of
two sections of Article I: Sections 8 and 10. These sections have very
little to do with each other. Section 8 enumerates some of the powers
of the Congress, paragraph 5 in particular codifying Congress' power to
coin money and regulate the value of that money. Section 10 enumerates specific actions which are prohibited to the States. Section 10, which is the only section of the Constitution which contains either the word "gold" or "silver" makes no mention whatsoever of any limits or constraints upon the power of the Congress.

............

It would seem that this legal scholar is call you a quack.

Like many of the solutions seized upon by hobbiest libertarians,
these monetary policies are concise, simplistic, and - unfortunately -
completely wrong. A return to the Gold Standard is not only profoundly
inadvisable for the United States, but also impractical, unnecessary,
and unrepresentative of the problems and solutions put forth by the
followers of Dr. Paul. In an effort to inject some sanity into the
debate, this article will address the second of three myths and
misunderstandings upon which the Gold Standard movement is based.

 

Amazing, you can copy and paste some blog written by leftwing nutcase. Please, start thinking for yourself for once.

 

Why wouldn't I call Friedman a Keynesian when Monetarists accept most of Keynesian theory while choosing to criticize only the aggregate demand model of Inflation?

You obviously have sold your soul to the Big Government economic models and have rejected all reason as Big Government destroys another Superpower from within.

I admit to not knowing the details of Gilbrath, but your condescending and arrogant assumption that everyone NOT agreeing with your hero is unread and unlearned is actually delusional.

BUY SAND!

ps Where does Crony Communism (is there any other kind?) fit in with your model of Economics?

 

Sorry Ruben. The Fed has not been audited in ages. That is the reason why they are being so stubborn with their lobbyists: because they want to eliminate the "Audit The Fed" portion of the financial services reform bill. They were trying to only have it be a one time event and limited in scope at that. The rest is pure posturing by the Fed that the Congress will have a say in monetary policy. It's simply not true. The Fed doesn't want any oversight - at all. And as it is progressing anyway, the Fed is set to get even more powers with the financial services bill. The auditing of the Fed should happen now even moreso because they are getting more powers. And BTW many have been trying to get this info with the FOIA. The Fed has been stalling.

In addition to the 1.25 trillion in mortgage backed securities that are on the Fed's balance sheet, there was a lot of crappy assets dumped from I believe it was Bear Stearns when the assets were purchased by JP Morgan. Some of the assets are actually derivatives that are bets that some of the biggest states in the US will fail! It looks like they got some of the crap from AIG too. I know www.zerohedge.com had a rather lengthly article regarding the assets including the afforementioned derivatives. Below is a story from Bloomberg on the assets.

http://www.bloomberg.com/news/2010-...swallowed-to-get-jpmorgan-to-rescue-firm.html

The other reason the Fed is being stubborn is there is probably a lot more junk on their balance sheet than what is known. But more importantly the Fed does not want to release the information as to what banks got what money with the TARP bailouts. Speculation is that many foreign banks also got some of this money. And the Fed doesn't want that known either.

Which leads to the new trillion dollar bailout of the European nations. It seems that this pattern is following exactly what happened in the US even down to the bank "stress tests". Tax Cheat Timmy seems to be presiding over this to a degree. Since the US is part of the IMF, we are on the hook for about $60 billion due to our 17% stake in the IMF. Yes WE as in taxpayers! Now, my thought on this is that it is going to go down similar to what happened when we bailed out AIG for about $180 billion. Goldman Sachs got about $20 billion of that via the backdoor bailout - without having to take a loss. They got 100% pay back from AIG!

http://paul.kedrosky.com/archives/2010/05/the_case_for_a.html

So, if you look at the above link, you will see the massive amounts of money that is owed to the UK, Germany, and French banks by the PIIGS (Portugal, Irleand, Italy, Greece and Spain). Note that there are no US banks listed so, we don't know how much is owed to the US banks. My guess is that it will go down this way: European Central Bank (ECB) gets the money, delivers it to the European banks, the European banks then pay back the money to each other and UK, France, and Germany. And then whatever needs to go to the US will come via the PIIGS banks and the UK, France and Germany. Hopefully there will be much more transparency than the bailouts here in the US. (Yeah right!)

Additionally, the currency swaps have been opened again to the ECB, Bank of England (BOE), Japan, Swiss and Canadian banks. What that means is that they are to use the dollars they borrow as they need to and also we get the same amount of currency from the banks that need the dollars but with the caveat that we won't use it. Also, some of this currency is speculated to be used for the borrowers to purchase US treasuries. Which we keep selling billions of treasuries and bonds to help make our budget. Which at this time we don't even have one for this year. I believe it was 1.6 trillion set forth for the budget initially. So far we have a 13 trillion dollar deficit! That's 41k per US citizen!

So, things should get very interesting soon.